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To: Swing_Thought
Corrections are painful. The key to avoiding the pain is avoiding the boom.

Deflation is not a correction. Deflation is breaking your left arm, to cure your broken right arm.

Deflation is a real bogeyman for you.

And everyone else who understands economics.

Why can't stocks be a good investment during a long-term, non corrective period of deflation?

Which Japanese stocks did well during their 2 decades of deflation?

Why can't bonds?

As long as the bond issuer doesn't go out of business due to deflation, bonds could be a good investment.

Why can't CDs? As long as you had faith that the company was sound

Which leads back to the unanswered question, which companies would do well during deflation?

Heck, cash buried in your back yard would be a good investment.

Proof that deflation is a bad idea.

Yes they did, and they'll undoubtedly do it again and again even if the central bank is abolished.

Your cure doesn't work.

But they didn't get too far with it back when people knew sound money. The people were wary, and rightly so.

I'm wary of these government greenbacks. Too bad.

Yeah, I can see how that stopped the government from going too far.

144 posted on 09/08/2009 11:31:25 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot
Deflation is not a correction. Deflation is breaking your left arm, to cure your broken right arm.

Deflation doesn't have to occur in only a correction, but it can. Present times are an example.

One aspect of free markets is that the market wants to set a market interest rate. The price of money. When central banks drive down the interest rates in their attempts to spur the economy, they signal to borrowers that this is a good time to borrow, and they signal consumers that this is a good time to spend rather than save. The result is excess debt, or looking at it from the other side of the coin, an over expansion of credit. Deflation of the credit bubble is required to correct this condition. It's the central bank interference with the market interest rate that causes the problem in the first place. Deflation is just the corrective process of the market.

Which Japanese stocks did well during their 2 decades of deflation?

It was a corrective deflation.

As long as the bond issuer doesn't go out of business due to deflation, bonds could be a good investment.

More of a worry during a corrective deflation.

Which leads back to the unanswered question, which companies would do well during deflation?

You don't seem to want to recognize that deflation can be the result of a correction or the result of economic productivity, and that the answer to your question depends upon recognizing that there are differences in investment strategies depending on which type of deflation one is experiencing as well as one's reading of most likely future conditions.

I'm wary of these government greenbacks. Too bad.

And each time the governments tried, the people demanded sound money again, and got it. After a long period of fiat it's about to happen again, I hope.

146 posted on 09/08/2009 3:26:38 PM PDT by Swing_Thought (The doorstep to the temple of wisdom is a knowledge of our own ignorance. - Benjamin Franklin)
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